5 Investment Grade Preferred Stocks For 2012

Below, I focus upon preferred stocks from insurance companies because of consistent premiums from their clients. I take care to mention those at or below par value or call price, which is the dollar amount that you get after maturity is reached. Generally speaking, you should avoid preferred stocks that trade significantly above par value, because you could end up losing the gap between what you paid for and the par value or call price if shares are called. With the Fed targeting 0%-0.25% for the federal funds rate and slowing global economic growth, you ought to consider the following:

This is high yielding relative to its rating, but you can rest assured that it is issued by an insurance company. Because it is a tad overvalued, I believe that $25.50 would be a good entry point. I suggest that retirees looking for better returns from their income instruments consider adding this to their portfolio, instead of jumping on high yield corporate bonds.

Arch Capital Group, a Bermuda-based company with approximately $4.87 billion in capital at September 30, 2011, provides insurance and reinsurance on a worldwide basis through its wholly owned subsidiaries. View recent company presentations here.

A 7.0% dividend yield is attractive given this turbulent market environment. Yet, this is nearing its 52 week high, thus consider buying this on a pullback. Because Moody's rated this at a Baa3, I feel comfortable recommending this to retirees, but be aware how much you can handle on the downside as these shares are subject to some adverse global economic conditions.

AXIS Capital is a Bermuda-based global provider of specialty lines insurance and treaty reinsurance with shareholders' equity at September 30, 2011 of $5.4 billion and locations in Bermuda, the United States, Europe, Singapore, Canada and Australia. Click here for a company presentation.

As early as January 25, this traded below $25.35 per share, which would be a decent entry point. So, be patient with the markets to fall, and this should follow. If you are an investor that respects strong name brands, consider obtaining MET-PB. This is also for those who are relatively risk averse, and are focused on income investing.

MetLife is a leading global provider of insurance, annuities and employee benefit programs, serving 90 million customers in over 50 countries.

If this goes below $25.40, then that would be a better entry point because it trades very close to the 52 week high. Also, the company has a global reputation, and should offer a degree of security than similar firms. I suggest this for investors that are concentrating on fixed-income, and seeking to replace lower yielding or maturing instruments.

PartnerRe is a leading global reinsurer, providing multi-line reinsurance to insurance companies. The company also offers capital markets products that include weather and credit protection to financial, industrial and service companies. For the year ended December 31, 2011, total revenues were $5.4 billion. At December 31, 2011, total assets were $22.9 billion, total capital was $7.3 billion and total shareholder equity was $6.5 billion. For company presentations, go here.

In this list, RNR-PC is the only one that trades right at the call price. However, that does not mean buy it now. I expect the entire market to draw back 3-5% in the next couple of weeks, and subsequently, these share prices will decline somewhat. I respect this company, and I believe that an income investor would be in good shape owning their 'preference shares.' RenaissanceRe Holdings is a global provider of reinsurance and insurance. View recent company presentations here.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.